Performance- or outcomes-based funding is intended to drive more equitable opportunities and outcomes in higher education. But in our research, we’ve found the opposite. Instead of diverting more money to under-resourced colleges and universities, these institutions tend to get less in states with POBF policies — and the effects are more pronounced among historically Black colleges and universities (HBCUs).

We explore the reasons for this in our book, which builds on growing public concerns about the impact of these policies on HBCUs, and we’ll detail our major findings here:

 POBF measures do not address historical underfunding experienced by HBCUs.

One important consideration for POBF designers is how to address past state funding disparities. HBCUs have long experienced the denial of resources needed to serve a student body that traditionally has been underserved. Underfunding has come in several ways, including in the form of duplicative programs, disproportionate state allocations, and forced desegregation (e.g., enrollment declines). In some cases, states take funds that should be invested in strengthening academic programs at HBCUs and use them to create similar academic programs at predominantly White institutions, hindering HBCUs ability to increase enrollment and generate revenue. (This is the basis of several court cases, such as Adams vs. Richardson, ruling that states should not fund dual systems of higher education.)

Tennessee State University, where 76 percent of enrollees are students of color and 65 percent are Pell recipients, shares this history of underfunding, with the state denying programs and resources needed to attract students and maintain enrollment. And the state’s POBF formula does not help. Although Tennessee awards additional weight for older and low-income students in its POBF formula, this does not translate into more funding for Tennessee State. Instead, it is the flagship institution, the University of Tennessee–Knoxville, that is disproportionately advantaged: The state has increased its funding to UT-Knoxville each year since the introduction of POBF. As a result, UT-Knoxville has a significantly higher per-undergraduate student allocation than Tennessee State ($6,653.90 vs. $4,147.48), even though Knoxville serves a drastically less diverse student body (16 percent students of color and 19 percent Pell recipients).

Schools with the fewest resources and most at-risk of suffering from significant underfunding have little representation on committees designing POBF models.

POBF policies do not reflect the diversity of institutions and institutional missions. This is a consequence of not having all groups represented in the decision-making process. For example, Florida’s POBF is administered by a board of governors, with few members of color. In Ohio, the POBF model was created by a committee of state university presidents, but the HBCU president was not included.

HBCUs should be represented at these decision-making levels because they have an explicit mission to serve underserved students, including students of color, first-generation college students, and students from low-income communities — students, who by and large, are disadvantaged by their K-12 schooling and have lower outcomes upon high school completion. Some institutions competing for outcomes-based funds have become more selective, admitting students with higher grades and test scores who are likely to graduate regardless of what a university does. This “creaming,” as it’s referred to, is resulting in dramatic drops in college enrollment of students who are perceived as less likely to graduate because of their GPA and test scores. These “unintended consequences” could be discussed before policies are put in place if representatives from these institutions were more included in the process. As policies are redesigned, a true move toward equity will require more direct stances addressing discrimination for our most underserved students.

Equity is not a first priority, but an afterthought, for many states introducing POBF.

Some policymakers claim to push POBF as an avenue to increase equitable outcomes among students; however, many states do not include equity considerations in their POBF formulas, and if equity considerations are included, they are in the form of “premiums” — or bonus and often optional metrics for underserved or at-risk students — rather than core, mandatory metrics. For example, in Florida, the metric for “Bachelor’s Degrees Awarded to Minorities” is not one of eight mandatory metrics; it is only an optional metric institutions can choose for themselves.

Here’s why this matters: Campuses committed to serving low income students and students of color are not receiving enough of a reward or financial support. Ohio, for example, introduced POBF in 2014, but did not add equity metrics that acknowledge the support needed to educate our most underserved students until 2015. From 2013 to 2014, Central State University, an HBCU outside of Dayton, Ohio, faced a reduction in per-student funding from the state to $3,031.76, below the per-student allocation average for public universities. This cut was even more damaging, considering Central State has the smallest endowment of all public Ohio universities. Ohio State University, with less than a quarter of the number of students of color and 100 times the endowment of Central State, receives double the per-student funding of Central State. See the evolution of Ohio’s funding formula and the change in per student allocation for Ohio’s sole public HBCU and two public schools below.

Changes in State Funding in the First Year of POBF in Ohio

Institution Per-student Funding (2013) Per-Student Funding (2014) % Change in Per-Student Funding
Central State University $3,095.59 $3,031.76 -2.10%
University of Cincinnati $6,605.16 $6,761.75 2.40%
Ohio State University $7,507.26 $7,737.74 3.10%
Mean $4,643.35 $4,603.29

Higher education institutions are diverse and serve different purposes, and POBF formulas must take that into account. As POBF policies are considered, a redress of an inequitable funding history, inclusion of diverse representatives, and honest conversations about equity must be had to best serve the most vulnerable students and the institutions like HBCUs that aim to serve them.

More than 30 states now have adopted or are in the process of adopting a formula that divvies out funding to public colleges and universities based on their outcomes for students. Called Performance- or Outcomes-Based Funding (POBF), these policies are inconsistent in their design, and in many cases, perpetuate longstanding inequities in our education system. In this series, we explore the current landscape around POBF policies and what states can do to build more equitable policies. This is the second post in this series, which draws from the book, “Outcomes-Based Funding and Race in Higher Education: Can Equity Be Bought?

LaToya Russell Owens is senior manager of learning and evaluation at UNCF. Kayla C. Elliott is a doctoral student and research assistant at Florida Atlantic University. She is also an alumna of Fisk University, an HBCU in Nashville, TN. Both are co-authors of the book, “Outcomes-Based Funding and Race in Higher Education: Can Equity Be Bought?

Read the other parts of our “Can Equity be Bought?” series: